When the California government decided to address his state's budget crisis by slashing pay for home health care workers, and cutting three-quarters of a billion dollars in Medi-Cal healthcare programs for the poor, the White House was furious. So was the SEIU. This is a recession, they reasoned, and those are poor and working class people. Citing the terms of the American Recovery and Reinvestment act, the Obama administration threatened to withhold $6.8 billion in federal stimulus funds unless the California legislature revoked the wage cut.

Obama "went straight for the most direct way to leverage California from the federal government," writes a source with knowledge of deliberations, "it was a big play, no question."

The right was furious about SEIU's involvement in negotiations, as were California government officials. But their concerns were laid to rest today when Washington decided to back down.

The Obama administration has backed off its threat to withhold billions of dollars in stimulus money from California, telling Gov. Arnold Schwarzenegger the state did not violate federal law in cutting pay for home healthcare workers in a bid to help balance the budget.

The right is pleased. But the SEIU is upset--at Schwarzenegger and the CA government, of course, but also at the White House, for leaving workers high and dry. The official word from SEIU president Andy Stern is directed mostly at Sacramento, which, he says, is implementing a plan that "defies all logic of Obama administration goals." But behind the scenes, others aren't letting the White House off the hook--they see it as a broken promise and breach of trust between allies.

Greg Sargent has a public relations angle on this same story. "In August of 2007, candidate Barack Obama did a high profile 'walk a day in the shoes' of California homecare worker Pauline Beck," Greg writes, "Now, however, Pauline Beck is suddenly about to become a public relations problem for Obama, and she may soon be asking whether Obama has in fact forgotten that day. That's because a new White House decision could mean a big wage cut for none other than Pauline Beck."

That's the SEIU's leverage, and a public sign of their dissatisfaction. I'm investigating the questions of what else the administration can do--or could have done--to convince Schwarzenegger not to make these cuts, and why they ultimately concluded that they lacked the legal standing to withhold stimulus dollars, and will report back when I have some answers.